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Re-emergent in the campaign discourse—an anti-bigness theme

The New Yorker notes that anti-trust law (which concentrates on combating the ills of monopoly power) has been a theme in the presidential campaigns of both Democrats and Republicans this primary season. The article notes that this theme was large for economic republicans, whose ideas were important in the early (19th century) politics of the Democratic party. A big republican theme was the tendency of bigness to lead to excessive concentration of economic and political power.

The article argues that “Hostility toward bigness has been cutting across party lines.” Bernie Sanders, in the campaign for the democratic nomination has pushed for a renewal of the Glass-Steagall protections, which imposed a wall of separation between parts of banks engaged in activities that might cause a conflict of interest. The new law he proposed would be called the Too Big To Fail, Too Big To Exist Act. With the New York primary over, it looks as if Sanders’s chances of winning the nomination have diminished. But the article points out that “the Clinton-Sanders argument is anything but a momentary campaign blip; it’s not even specific to those two candidates.” In sum, he argues, “concentrated economic power has emerged as a principal villain of our day.” Among the Republican presidential candidates to attack big business in one way or another in this presidential primary season have been Ted Cruz, Mike Huckabee, and Donald Trump. It seems that the financial crisis and alarming trends in the concentration of wealth have changed the U.S. political landscape.

The topic of economic bigness is not a perennial campaign theme in the U.S., even on the part of progressives, who tend to be the bloc most in favor of anti-trust regulation and the like. “Liberals, who think of themselves as the countervailing force to business, have over the long term only intermittently embraced [Supreme Court Justice Louis] Brandeis’s view that government should deal with a concentration of economic power by breaking big businesses into smaller units.”

The Democratic Party embraced the anti-bigness view early on, but in the 1930s for example, antitrust did not become a centerpiece of FDR’s New Deal. Among other things, the early anti-big-business view in the U.S. jurisprudence and politics encompassed concerns about developing an economy that would allow democracy to flourish, preventing the development of highly concentrated or imbalanced political power.

Moreover, while “liberal reformers of the early 20th century usually counterpoised big business and small business…as the United States became more affluent, critics of the corporation began focusing on protecting its consumers rather than its smaller competitors.” Under the Sherman Act, the main U.S. antitrust law, bigness itself is not illegal. In any event, in modern times there has been little thought in economics or the field of antitrust law about the impact of concentrated industrial power on the strength of democratic institutions.

The article came to mind two weekends ago when  I was reading the New York Times, which reported on the front page that recent regulatory efforts—combined with stockholder concerns about room for growth—were having the effect of shrinking Citigroup, the holding company of Citibank. The company has been spinning off various businesses in a downsizing effort. The article also observes that nonetheless some of the other huge U.S. banks are bigger than they were before the financial crisis.

So here you have another policy issue–other than the usual fiscal policy, Fed rate changes, etc. The “bigness” variable in macroeconomics is sometimes called the “degree of monopoly” and is a key determinant of the size of the pricing markup–and hence of income distribution. Alan Krueger is one Democratic policy wonk who has decried the role of the goods-market market-power factor (among others) in heightening economic inequality. And I still mean to get back to the distributional variable in an economic model that I discuss in this space occasionally. A chapter of a book by philosopher Michael Sandel covers some of the republican issues in U.S. jurisprudence on antitrust law. We hope to see Hillary Clinton take on these issues if she becomes the Democratic candidate, incorporating some of the concerns articulated most clearly by the Sanders campaign. But the New Yorker article (which appears in the “books” section, no less) makes for a fascinating read, as its coverage frequently does.

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